UK offers 'most generous tax breaks in the world’ for fracking

The British chancellor, George Osborne, has announced a 30% tax rate for shale gas producers, less than half the amount paid by the conventional oil and gas industry, in a bid to enhance the UK’s energy security.

The 30% tax rate is designed to kick start investment into what
the chancellor hopes will be an important new industry for
Britain; it compares to 62% tax on all new North Sea oil fields
and 81% for older offshore operations.

This puts shale gas on a par with a handful of conventional oil
and gas fields such as the deep-water sites off the west coast of
Shetland, which are high risk and particularly difficult to
develop. Deep water sites have also been given a 30% tax rate on
profits in order to encourage their development.

“Shale gas is a resource with huge potential to broaden the
UK’s energy mix. We want to create the right conditions for
industry to explore and unlock the potential in a way that allows
the communities to share the benefits,” said Osborne in an
announcement on Friday.

He has said he will force shale gas companies to pay local
communities 100,000 per well, in the hope that this will persuade
them to be more sympathetic to fracking in their area.

“This new tax regime, which I want to make the most generous
for shale in the world, will contribute to that. I want Britain
to be a leader of the shale gas revolution – because it has the
potential to create thousands of jobs and keep energy bills low
for thousands of people,” he said.

But environmental groups were quick to point out holes in the
chancellor’s scheme.

“The chancellor is telling anyone who will listen that UK
shale gas is set to be an economic miracle, yet he’s had to offer
the industry sweetheart tax deals just to reassure them that
fracking would be profitable,” Lawrence Carter from
Greenpeace told the Guardian.

While Andrew Pendleton from Friends of the Earth said it was a
disgrace to be handing out cash incentives to polluting energy
firms while everyone else in austerity Britain is being told to
tighten their belts.

Public support in largely against fracking as an energy
alternative, as a recent survey found that almost 80% of those
asked believed the UK should reduce its reliance on fossil fuels.

The UK’s ruling collation government is split over the issue.
While the Tories back fracking and are against more onshore wind
farms, the Lib Dems, including the energy secretary Ed Davey, are
supportive of green power and are not convinced that shale will
bring down household bills.

Expert opinion back the Lib Dems stance on shale with the UK
energy regulator Ofgem, Deutsche Bank and the company in receipt
of the chancellor’s tax break Cuadrilla, saying that it won’t
bring down energy bills for consumers.

But as Britain’s old coal fired power stations are gradually
being closed down and new nuclear power plants are years behind
schedule, the government is becoming increasingly desperate to
plug the hole in Britain’s energy deficit with short term
solutions.

Shale gas is produced by a highly controversial process known as
hydraulic fracturing, where a mixture of chemicals, water and
sand is blasted into rock to release the hydrocarbons contained
in its pores. The procedure is widely used in US, where fracking
has increased dramatically in the last six years, and has been
linked to earth tremors, water pollution and severe health
defects among people living close to wells.

France, which is estimated to have some of the biggest shale gas
reserves in Europe, has banned fracking.